THE BOTTOM. OH MY GODDDDDDDDDDDDDDDDDDDDDDDDDBy MATHEW INGRAM
02:48 GMT-05:00 Tuesday, March 13, 2001
To answer one of the most frequently asked questions of the past few months: No, this is not the bottom. The Nasdaq and the technology market in general are both going a lot lower Πin fact, the Nasdaq market index is likely going to zero. All the technology stocks that investors used to be so enamoured with, the Ciscos and the Nortels and the Dells and Intels, are all going bankrupt and their stocks will be worthless in a matter of months. Sell every stock you own, buy some dried food and head for the hills.
Veteran investment types say any market that has sold off the way the Nasdaq has in the past year Πa record bear market correction of more than 60 per cent from its peak Πcan't possibly bottom out until all the optimism is gone. Not just some of the optimism, but all of it. Every last speck. In fact, there should be nothing but doom and gloom everywhere an investor looks Πtotal capitulation Πor the much-desired bottom will never occur. As the brokers like to say, all the buyers must be "puked out."
Therefore, in the interest of getting all this over with as soon as possible, this column will not contain any positive comments whatsoever about the Nasdaq or the technology market in general. Forget about buying tech stocks of any kind Πthere will be no rebound. This is not a U-shaped market or a V-shaped market or even the dreaded L-shaped market (a downturn followed by a flat line), but an unbroken backward slash that descends at a precipitous rate forever to the horizon and never recovers.
All the claims that led Nasdaq stocks Πand even the technology-focused members of the Dow Jones industrial average, such as Microsoft and Intel Πto climb so high have been forever repudiated. Moore's Law, the dictum that stated that microprocessor speeds can be expected to double every 18 months, no longer applies, and therefore computers (defined as anything with a microprocessor) will not get any faster and may even start to slow down. Fibre-optics equipment likewise will get no faster, nor cheaper.
In fact, the entire Internet has now proven to be a colossal joke, a shaggy dog story of unprecedented proportions. Bre-X and the junior mining scams of the 1990s were nothing compared to the Internet Πeverything that was ever even remotely connected to the Internet or the Web (they're not really the same thing) is history. The Internet will go back to being just a convenient way for university professors and high-school geeks to trade calculus equations and bad jokes, the way that it was meant to be.
This doesn't mean just an end to sites like JustWhiteShirts.com or Pets.com or Bid.com Πit means that anyone who sells equipment that is used by the so-called Internet will also fail as a profitable business. That means Nortel and Cisco and Lucent and Alcatel will go back to being just sellers of telephone equipment, which as anyone knows is not a worthwhile business by any stretch of the imagination. Most of them will fail.
The same goes for computers. Dell and Gateway and Hewlett-Packard Πand especially Apple Πwon't be able to make any money no matter how hard they try. They will keep shrinking until there's virtually nothing left, except maybe a shell that sells people replacement printer cartridges or hard drive parts. Computers will become like phones, and everyone knows that's nowhere. Everyone has phones already, don't they? Why would anyone in their right mind want more than one phone or more than one computer?
So where should investors look now? Follow the great Warren Buffett, chairman of Berkshire Hathaway, who was widely ridiculed for not investing in technology. His company reported blockbuster profits and the stock Πwhich will set you back $71,000 for a single share Πclimbed because of Mr. Buffett's investments in such companies as Dairy Queen, See's Candies, General Re (insurance), Shaw Industries (carpets), Gillette (razors), Coca-Cola and Dexter Shoes. That's where the future of investing really lies.
Do not, under any circumstances, buy anything related to technology, no matter how long your investing horizon is Πand don't, for God's sake, start telling people that this pessimism is overdone (just as the unguarded optimism was a year and a half ago) or that right now looks like a pretty good buying opportunity. That would spoil everything.
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